[Federal Register Volume 70, Number 7 (Tuesday, January 11, 2005)]
[Notices]
[Pages 1929-1931]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-41]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50958; File No. SR-Phlx-2004-93]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. To Eliminate the Maximum Order Delivery Size Over the 
AUTOM System

January 4, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on December 15, 2004, the Philadelphia Stock Exchange, Inc. 
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III, below, which Items have been prepared by the 
Phlx. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx is proposing to adopt amendments to Phlx Rules 
1080(b)(i)(A), (B), and (C), Philadelphia Stock Exchange Automated 
Options Market (AUTOM) \3\ and Automatic Execution System (AUTO-X), 
reflecting a system change that would eliminate the maximum eligible 
order size of 5,000 contracts for delivery on the AUTOM System. Under 
the proposal, there would no longer be any limitation on the size of 
orders eligible for delivery via AUTOM.
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    \3\ AUTOM is the Exchange's electronic order delivery, routing, 
execution, and reporting system, which provides for the automatic 
entry and routing of equity option and index option orders to the 
Exchange trading floor. Orders delivered through AUTOM may be 
executed manually, or certain orders are eligible for AUTOM's 
automatic execution features, AUTO-X, Book Sweep, and Book Match. 
Equity option and index option specialists are required by the 
Exchange to participate in AUTOM and its features and enhancements. 
Option orders entered by Exchange members into AUTOM are routed to 
the appropriate specialist unit on the Exchange trading floor. See 
Exchange Rule 1080.
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    Below is the text of the proposed rule change. Proposed deletions 
are bracketed.

Philadelphia Stock Exchange Automated Options Market (AUTOM) and 
Automatic Execution System (AUTO-X)

    Rule 1080. (a) No change.
    (b) Eligible Orders.

[[Page 1930]]

    (i) The following types of orders are eligible for entry into 
AUTOM:
    (A) Agency orders [up to the maximum number of contracts permitted 
by the Exchange] may be entered. [Agency orders up to 5,000 contracts, 
depending on the option, are eligible for AUTOM order delivery, subject 
to the approval of the Options Committee.] The following types of 
agency orders are eligible for AUTOM; day, GTC, Immediate or Cancel 
(``IOC''), market, limit, all or none, or better, simple cancel, simple 
cancel to reduce size (cancel leaves), cancel to change price, cancel 
with replacement order, and possible duplicate orders.
    (B) Respecting non-Streaming Quote Options, on-floor orders for the 
proprietary account(s) of non-SQT ROTs and specialists via electronic 
interface with AUTOM may be entered[, up to the maximum number of 
contracts permitted by the Exchange], subject to the restrictions on 
order entry set forth in Commentary .04 of this Rule. [Orders up to 
5,000 contracts, depending on the option, are eligible for AUTOM order 
delivery.] The following types of orders for the proprietary account(s) 
of ROTs and specialists are eligible for entry via electronic interface 
with AUTOM: GTC, day limit and simple cancel.
    (C) Off-floor broker-dealer limit orders[, up to the minimum number 
of contracts permitted by the Exchange], subject to the restrictions on 
order entry set forth in Commentary .05 of this Rule, may be entered. 
[Generally, orders up to 5,000 contracts, depending on the option, are 
eligible for AUTOM order delivery on an issue-by-issue basis, subject 
to the approval of the Options Committee. The Options Committee may 
determine to increase the eligible order delivery size to an amount 
greater than 5,000 contracts, on an issue-by-issue basis.] The 
following types of broker-dealer limit orders are eligible for AUTOM: 
day, GTC, IOC, simple cancel, simple cancel to reduce size (cancel 
leaves), cancel to change price, cancel with replacement order. For 
purposes of this Rule 1080, the term ``off-floor broker-dealer'' means 
a broker-dealer that delivers orders from off the floor of the Exchange 
for the proprietary account(s) of such broker-dealer, including a 
market maker located on an exchange or trading floor other than the 
Exchange's trading floor who elects to deliver orders via AUTOM for the 
proprietary account(s) of such market maker.
    (ii) and (iii) No change.
    (c)-(k) No change.
    Commentary: No change.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Phlx included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Phlx has prepared summaries, set forth in sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to increase the number 
of orders that are eligible for delivery over the AUTOM System by 
eliminating the current 5,000 contract maximum size limitation on 
orders delivered via AUTOM.
    Currently, Exchange Rules 1080(b)(i)(A), (B), and (C) establish a 
maximum eligible size of 5,000 contracts for orders delivered via 
AUTOM. Orders delivered via AUTOM with a size greater than 5,000 
contracts are currently routed back to the point of origin of the order 
(i.e., to the member or member organization that delivered the order), 
or to a Floor Broker designated by the member or member organization 
that delivered the order. The proposed rule change would eliminate any 
limitation on the eligible size of AUTOM-delivered orders; thus, 
eligible orders of any size could be delivered via AUTOM.
    The Exchange believes that the elimination of the 5,000 contract 
maximum eligible AUTOM order delivery size should result in a greater 
number of orders and contracts delivered via the AUTOM System, which 
should result in a greater number of orders received and handled 
electronically on the Exchange.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \4\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \5\ in particular, in that it is designed to perfect 
the mechanisms of a free and open market and the national market 
system, protect investors and the public interest and promote just and 
equitable principles of trade, by eliminating the maximum size 
limitation for orders delivered via AUTOM, thus allowing eligible 
orders of any size to be delivered electronically to the Exchange via 
AUTOM.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received by the 
Exchange.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(5)\7\ thereunder. The 
Phlx has represented that the proposal effects a change in an existing 
order-entry or trading system of a self-regulatory organization that 
(i) does not significantly affect the protection of investors or the 
public interest; (ii) does not impose any significant burden on 
competition; and (iii) does not have the effect of limiting the access 
to or availability of the system. At any time within 60 days of the 
filing of such proposed rule change, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest or for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 19b-4(f)(5).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-Phlx-2004-93 on the subject line.

[[Page 1931]]

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-Phlx-2004-93. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the Phlx. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-Phlx-2004-93 and should be submitted on or before 
February 1, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 15 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E5-41 Filed 1-10-05; 8:45 am]
BILLING CODE 8010-01-P